‘Disclose: don’t double count’: Gravis calls on industry to provide feedback to Treasury

Consultation period ends on Wednesday 10 January

'Clock is ticking for pay gap disclosure


Gravis has called on the asset management industry to participate in the Treasury’s consultation period on cost disclosure regulation and its ramifications on investment trusts, ahead of its 10 January deadline.

The Treasury is currently preparing two Statutory Instruments (SIs) to address the relevant wording of both PRIIPs and MiFID, which Gravis says will help to resolve some of the confusion which has resulted from the method by which costs are displayed.

However, it added that the measures will not remove all of the confusion faced when it comes to trust cost disclosure.

See also: The ‘gruffalo’ in the room?: FCA releases interim measures to protect trusts from cost disclosure regulation

Gravis said it would be raising the following points to the Treasury during the consultation:

  • The EMT data service, which bundles costs together, should show a zero cost of owning any UK investment company given they are listed entities
  • Cost information should not be duplicated and should be presented clearly and found easily in company report and accounts
  • Encourage the Treasury to accelerate the passage of the two SIs through Parliament
  • Encourage the Treasury to request that the FCA uses forbearance to suspend current guidance on cost disclosure, while the SIs progress through the legislative process
  • Encourage the Treasury to consider drafting an additional SI which would remove UK Investment Companies from AIFMD and treat them, legally, as companies, rather than funds

The firm, which manages real estate investment trusts, has been working closely with professional investors as well as Baronesses Bowles and Altmann, to remove the AIFMD (Alternative Investment Fund Managers’ Directive) classification from investment companies.

The regulatory requirements, which mean funds and trusts both have to supply KIID documents outlining their ongoing charges figures, have been hampering fund selectors’ ability to buy into trusts as it makes them appear artificially expensive, given investors buy the listed vehicles at ‘price’ and yet the charges are applied to their underlying net asset value. This therefore means investment companies are required to effectively ‘double count’ costs.

A spokesperson for Gravis said: “At present, all of the costs of running UK investment companies are published in recognised company literature, such as the report and accounts. The issue we’re challenging is that under the current regime, those same costs are bundled together and distributed to investors through a data service known as the EMT. It is this activity which means that these costs are counted twice.”

They added that “in a further frustrating twist”, the UK is “the only market worldwide where this happens”.

“The UK market is vibrant and huge, there are over 350 investment companies listed in the UK and they include investment trusts, REITs, and investment companies that invest in renewables, infrastructure, and private equity. In pursuing this path, we have put one of our great success stories in jeopardy,” the spokesperson continued. “At a recent meeting, hosted by Baroness Altmann at the House of Lords, which was attended by an array of investors, it was remarkable how many revealed that due to cost disclosure, they no longer used UK investment companies to achieve their investment goals.

“When asked how they would respond to the resolution to the current concerns many felt they would immediately return, largely due to the significant discounts and high yields available across the board today.”

Members of the financial services industry can participate in a consultation period, by sending comments to retail.disclosure@hmtreasury.gov.uk by 10 January.